On January 2, ICE Futures Europe published new rules prohibiting disruptive trading practices that are similar to rules previously proposed by ICE Futures U.S. and ICE Futures Canada – however, there are differences. In general, unlike the proposed disruptive trading rules of ICE U.S. and ICE Canada (which themselves are different from each other), the proposed rules for ICE Europe seem to prohibit all conduct that touches upon four prescribed activities – not just intentional conduct; however, one additional type of conduct is subject to a “reckless disregard standard” (i.e., entering an order with reckless disregard for the adverse impact of the order). The four prescribed activities include conduct sometimes regarded as spoofing; misleading other participants; overloading, delaying or disrupting exchange or other market participants’ trading systems; and disrupting the orderly conduct of trading. For example, whereas ICE Futures U.S. proposes to prohibit trading activity with the “intent to overload, delay, or disrupt the systems of the Exchange or other market participants” (emphasis added), ICE Futures Europe proposes that a trader shall not “overload, delay, or disrupt the systems of the Exchange or other market participants” – without any qualification. An accidental incident could seemingly be a violation of this provision. ICE Europe’s proposed new rules are scheduled to be effective January 16. ICE Futures U.S.’s and ICE Futures Canada’s new rules are scheduled to go into effect on January 14. (Click here for additional information in the article “ICE Futures U.S. and Canada Amend Rules to Expressly Prohibit Disruptive Trading Practices” in the December 22, 2014, to January 2 and 5 edition of Bridging the Week.)
My View: Given the potential serious consequences of engaging is disruptive trading as a result of enforcement actions brought by national regulators or disciplinary actions brought by exchanges –let alone potential criminal prosecutions (click here to see the article “NJ-Based Trader Previously Sanctioned by UK FCA, CFTC and CME Indicted in Chicago for Same Spoofing Offenses,” in the September 29 to October 3 and 6, 2014 edition of Bridging the Week)– it is incumbent for regulatory authorities worldwide to articulate a single standard for prohibited practices that does not inadvertently capture legitimate practices. This appears to be an appropriate project for the International Organization of Securities Commissions.